SeaIntel finds P3 a tough act to follow

Tuesday, August 20, 2013

SeaIntel Maritime Analysis said the proposed P3 Network of Maersk Line, Mediterranean Shipping Co. and CMA CGM will be a difficult for competing carriers to challenge on the Asia-Europe trade lane in terms of economies of scale, where lower unit cost becomes essential to all the carriers engaged in this trade.
The company also believes the three big Japanese carriers need to order vessels with capacities of more than 10,000 TEUs, if they want to remain competitive in the Asia-Europe trade.
The SeaIntel Sunday Spotlight newsletter said "If the P3 alliance is approved by antitrust authorities and deploy their largest vessels in the Asia-Europe trade, they will be able to operate an average vessel size of 12,700 TEUs in the trade from Q2 2014 and thereby have a significant scale-advantage compared with their competitors."
Chief operating officer and partner at SeaIntel, Alan Murphy, said: “Our analysis shows that the CKYH and G6 Alliances in Q2 2014 will be able to operate an average vessel size of 10,650 TEUs and 11,600 TEUs, respectively. However, that will leave the P3 carriers with a much lower unit cost and a competitive advantage compared with the two other alliances.”
SeaIntel said "it would not be sufficient for the CKYH and the G6 Alliance to merge, if they wanted to operate a similar-sized network and have a similar scale advantage like the P3 Alliance in the trade. If we should create a theoretical alliance where scale advantage is the most important parameter, we find that COSCO, Hapag Lloyd, APL, CSCL, Hanjin and UASC would need to cooperate. Nevertheless, they will not be able to operate a similar-sized network as the P3 Alliance, but they would be able to match them on scale-advantage and be just as competitive. "
Murphy said "we do not find any realistic scenarios where some carriers can pool their resources together and form an alliance where they can have nearly the same scale advantage as the P3 carriers, but operated in a smaller network, as this would require that the CKYH and G6 Alliances split up in the near future.
"Finally, we find that the Japanese carriers, NYK, MOL and 'K' Line, stand in front of a choice; if they want to continue being competitive in the trade, they need to place orders for +10,000 TEUs vessels. Otherwise, we see a possibility that they may be forced out of the Asia – Europe trade, as their vessels will simply not be competitive," he added. - Chris Dupin